An unfinished subdivision has become the landmark of the housing bubble, with thousands of families left in unfinished neighborhoods footing the bill with poorly connected infrastructure and artificially low land value due to the now permanent "temporary" surroundings. Photo by Blogtherockies.com in Bolder Colorado.
Many people who have been involved with, and a larger majority who have been critical of, the new Tysons Corner concept have brought up the rationale that these plans only benefit big developers by allowing more development while hurting the infrastructure of the region. This has become a very popular anti-urbanism sentiment for Tysons Corner and the main rousing point of many residents in the rest of Fairfax County. These points are rarely brought up when a new 100 unit subdivision is created in an exurb. I think this is worthy of an investigation as to the benefits and cost of each form of allowable development and which should be viewed as a form of jurisdictional subsidized greed.
Exurb Subdivision Developer
Rezoning of exurb subdivisions from farmland to low density residential takes anywhere from 18 months to 4 years depending on the current market conditions of the region. In most cases the land owner has invested a few million dollars, which many times can over extend the local developer who does not have the operating budget of more urban project corporations. Because of this constraint on available funds a local developer will often have a deep focus on attaining construction plan approval as quickly as possible in order to either start construction or sell the approved plans to a management/construction company. Due to this lack of long term investment to the well-being of the region and specifically the project, the developer has no incentive to creating a better neighborhood and will only meet the minimum requirements of the jurisdiction. Once the property is out the developers hands they are not invested in how marketable the project will be, what level of materials will be used in construction, etc. Often times the construction and management companies who buy these type of pre-approved plans have very thin profit margins and again will not provide any elements to project not absolutely required by the approved construction plan. Additionally, the construction contractor will try to save money where ever possible which has led to an era of very shoddily constructed, though superficially impressive, housing projects.
Many construction companies used cheaper materials than proven methods used in homes, with reduction in stone and brickwork, and an increase in poor quality lumber which increases long term costs for the homeowner and leaves them susceptible to structural failure not caught by inspection.
At the end of many projects, if they are lucky enough to actually be constructed and not be left as a vacant lot by an approve and sell developer, the County often must come back through and finish certain components of road and pedestrian infrastructure as well as the inherent maintenance costs of decentralized facilities and transportation networks. A typical 100 unit subdivision once constructed and sold will bring the jurisdiction $600,000 from approximately 50 acres of land space. The jurisdiction will typically spend on the order of $50,000 a year for inspection and maintenance of a subdivision of this size, not including transportation costs or typically covered HOA costs. Including the hidden cost of transportation/school/medical/protection viability for exurb projects in a jurisdiction, a number which has been estimated between $100 and $500 per unit per mile from a commercial district center, this could rise to an annual jurisdiction cost of $550,000 ($500,000 additional) a year just for these 100 units for an average 20 mile exurban distance. The net revenue from this project for a jurisdiction is almost a wash in many cases and leaves the jurisdiction with many solvency risks including a sudden shift to other regions or lack of jobs.
At the end of the day, the developer has long since left the project in question, cashing in a check for the sale and moving onto another piece of land purchased to continue the cycle. While many people know the construction/home builder company that created their home, almost no one knows who the actual original developer was who owned the property. This lack of transparency allows the developer to continue to create sub-average products without defamation or public outcry.
Urban Developer
A common layout for new urban high rise projects. Photo of Downtown Vancouver courtesy of AllAboutCities.ca blog by Wendy Waters
For the purpose of this analysis an urban developer will be considered those who are publicly well known, construct high-rise or high density projects within established urban cores which leverage existing infrastructure. Rezoning of urban redevelopments often is a 5 to in the case of Tysons Corner 20 year process which filters through developers who are not truly invested in the well being of the city. Often rezoning cases for these $100 million plus projects require an equal share private investment to the surrounding infrastructure, separation of ambitious projects into multiple phases to ensure market conditions will bear a project, and special tax allotments. All of these elements are currently required of new projects in Tysons Corner. Most urban developers will retain rights to a project after construction through the use of a special management company which will share the profit of the new construction. This keeps an urban developer invested in the overall well being and marketability of the project even after construction and occupancy, which has the added benefit of continued private investment in the upkeep of the adjacent transportation and pedestrian networks, utilities, and overall aesthetics.
The developer is also more likely to incorporate elements such as LEED criteria that reduce pollution and energy usage of a building as this form of construction also has the added benefit of annual maintenance cost reduction for the property. Construction of high rises also requires much higher construction standards than single family housing including extensive inspection of all elements during the construction process which ensures very high levels of quality in the materials used. A developer knows that for the next 40 years they will not only need to compete against other existing similar buildings, but also buildings that will be constructed in the future which may include more attractive and new features. Due to this reality the developer will invest the upfront cost to provide a long term marketable building.
Terrazzo Nashville is a mixed use development project which incorporates LEED standards, a practice which only a handful of boutique sized housing project have incorporated, but is common in urban developments and helps reduce operation costs for the owner.
Due to the upfront $100 million plus investment made for the purchase of these types of properties developers are far less likely to end a project prior to completion, therefore when unburdened or halted by the jurisdiction, it is typically a certainty that the construction will eventually occur. A high density project can provide in the range of 200 units, or commercial equivalents, for every acre of land space. While the tax revenues from each unit could be half of that found in a single family detached, by sheer density, 10,000 units can be provided in the same area that only 100 units are provided in an exurb. The developer in a rental project will continue to pay the taxes on these units, which for 10,000 units could equal $30 million of annual revenue for the jurisdiction. While the cost of maintenance and transportation for a project of this size will be much larger per acre than its exurban comparable, the per capita cost, and therefore the ratio to revenue, is far smaller. Additionally, due to the inherent proximity of these projects to existing transportation infrastructure and the viability of mass transit, additional jurisdictional cost savings can be attained. Even with a 10 times larger inspection and maintenance cost for the jurisdiction, accounting for $500,000, and an annual allotment to existing infrastructure and mass transit overall of $2.5 million for these 10 or 15 high rise buildings, the jurisdiction can still anticipate a windfall yearly profit of over $25 million. The developer will clearly make money from the project, but has invested significant capital to do so. Is this to be faulted? The American dream is, and will continue to be the concept that entrepreneurship should be rewarded when done in a sustainable and beneficial way. Beyond the developer and jurisdictional benefit of these forms of construction there is the hidden benefit of user happiness. A healthy, well funded, well connected city provides opportunity to its residents, attracts new businesses, and allows a wide range of low income to high income households through a diverse housing base.
The Dunwoody, Georgia project High Street by Dillard and Galloway, LLC will likely look very similar to renderings as the marketability of this type of development is quintessential to the amenities and regional aesthetics of the project.
It is always possible to view the profit made from big developers in a city and cite that they were built off of the capital investment of the public through projects such as the silver line. However, when the analysis is divided to also review the revenue benefit that is returned to the public for that capital investment, the return on investment becomes much more apparent. Even if only 10 or 15 buildings come of the new Silver Line, the added annual revenue of $25 million to the County will pay for the public investment of the silver line ($1 Billion) in 40 years. This amount of additional density is only 10-20% of the anticipated goal for Tysons Corner, and if fully utilized, the county could see a return on investment in less than 10 years. Finally, the most important of all, this form of construction allows more options for residents who want to live close to their work and makes the cost of suburban living and property less by increasing the supply of urban property.
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That “Photo of Downtown Portland” is actually a photo of downtown Vancouver, Canada.
Oh, thank you for the correction. Vancouver being one of my top 5 favorite cities in the world, I would hate to slight them.
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